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Economics Essay

787 words - 4 pages

7303AFE Economics

Microeconomics Assignment

Ning Li s2782650
Lin Tan s2740728
Huy, VO s2862772
WORD COUNT: 531
Question 1
1.1 a) In 2012, it was the second driest in 60 years, and the 2011-2012 winter was unusually cold (Arbour, 2012). The weather in Spain, the world’s largest producer, was unexpected bad during harvest season. As a result, the output of olive oil was dramatically decreased, consequently as little as half of what was in 2011 (Dolan, 2013).
b) Since Spain exports 60% of olive oil to more than 100 countries, the bad weather had also affected the global market. According to olive oil statistics, the Spain exported around 500,000 metric tons (1000 tonnes) in ...view middle of the document...

2 diagram predicted.
However, the demand of olive oil is not only affected by prices, but also determined by complex factors such as consumption habits, healthy requirements of olive oil and so on. The supply curve shift is a simple illustration for price and quantity change.

1.4

Explanation
Australia is heavily dependent on olive products from foreign countries (NRIA, 2013), with import of 14,815 tonnes with a value of $42.1 million Australian dollars in 2010-2011. Imported olive oil contributed to 80% of Australian domestic consumption.

(International Olive Council, 2012)
As 26% table olive imported from Spain, there was approximate $1.67 per kg on average value of Spanish olive products (Australian Olives, 2013). Thus, as a result of bad weather and harvest, it is expected the above developments would affected Australian imports of olive oil and shift the Supply curve to the left, with slight increased prices and a decline in quantity.
In terms of the Demand curve, it is expected to move to rightward, because of the increasing demand in Australia market at the end of 2012.
(Butler, 2013)
(Butler, 2013)
The import for olive oil climbed up 32% in Australia with 14% rose of extra virgin olive oil price. As a result, the price of the Demand curve goes up and the quantity goes up as it is illustrated above. Combination of the effects...

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